Cabinet ministers launch unprecedented attack on Bank of England over inflation crisis

The interventions came as Sir Howard Davies, the chairman of NatWest, warned in an interview with The Telegraph that “unless the Government does something more, I think we will see quite a big squeeze”.

Sir Howard revealed calculations by NatWest showing that the bottom fifth of households will need to cut discretionary spending by almost 20 per cent to make up the hit from higher costs, such as energy and food, without taking on debt.

Calling for urgent tax cuts, Lord Moylan, who was a senior adviser to Mr Johnson at City Hall, said: “It’s just this constant stand-off between the PM and his Chancellor. The PM needs to be the one clearly taking the lead.

“He shouldn’t be going cap in hand to the Chancellor. It’s becoming unseemly that we have had 25 years of two big beasts dominating everything and they end up in constant disagreement and this paralyses the Government.”

A Treasury source insisted Mr Sunak and Mr Johnson were “on exactly the same page” and pointed out that the Chancellor had introduced a rise in National Insurance thresholds and a fuel duty cut as well as promising a future income tax cut.

But many senior Tories want him to go further urgently – with Mr Johnson indicating to MPs last week that he was among them. A Cabinet minister said: “The Chancellor should present options showing what taxes could be cut, how will they be cut and the [difference] it would make to people’s pockets.”

The minister said the Bank’s handling of inflation raised “fundamental questions” about its “preparedness and how match fit some of these institutions are”, adding: “People are now questioning its independence.”

The minister said that while many in the Government believed “we can’t cross this line” of passing any judgment on the work of the Bank, the Chancellor could do more to hold it to account.

The other Cabinet minister said: “The Bank hasn’t been getting things right for a long time. Haldane was a loss to them, and the fact he has turned out to be right should be a realisation that the Bank’s groupthink is quite risky.”

Last week Liam Fox, the former defence secretary, broke ranks to declare that the Bank had “[underestimated] the threat” of rising inflation.

He said: “The Bank of England persisted beyond any rational interpretation of the data to tell us that inflation was transient, then that it would peak at five per cent.” The Bank now believes inflation will reach 10 per cent this year.